1958 (11) TMI 25 - HC - Income Tax

Issues Involved:
1. Construction of section 35(10) of the Income-tax Act.
2. Retrospective operation of section 35(10).
3. Finality of assessments before 1st April, 1956.
4. Authority of the Income-tax Officer under section 35(10).

Detailed Analysis:

1. Construction of Section 35(10) of the Income-tax Act:
The primary issue in this case is the interpretation of section 35(10) of the Income-tax Act, which was introduced by the Finance Act, 1956. The petitioner contends that section 35(10) should not apply to assessments that were finalized before its introduction on 1st April, 1956. The court examines the language of section 35(10), which states that if a company avails of the amount on which a rebate was allowed for declaring dividends in any year, the amount shall be deemed to have been made the subject of incorrect relief under the Act. The court concludes that the language of section 35(10) is clear and unambiguous, indicating that the rule applies to rebates granted in respect of assessments for the years 1948 to 1955 inclusive.

2. Retrospective Operation of Section 35(10):
The petitioner argues that section 35(10) should not have retrospective operation, as it would affect assessments that had become final before its introduction. The court notes that while the general rule is that statutes are presumed to apply prospectively, section 35(10) explicitly lays down a rule that applies to rebates granted in the past. The court emphasizes that the use of the word "deemed" in section 35(10) introduces a legal fiction, treating rebates granted in the past as if they were granted by mistake. The court concludes that section 35(10) has retrospective operation as it applies to rebates granted before 1st April, 1956.

3. Finality of Assessments Before 1st April, 1956:
The petitioner contends that the assessments for the years 1950-51, 1951-52, and 1952-53 had become final before 1st April, 1956, and should not be affected by section 35(10). The court acknowledges that assessments are generally considered final once completed. However, the court clarifies that section 35 deals with the rectification of mistakes, and section 35(10) specifically addresses the rectification of rebates granted in the past. The court concludes that the finality of the assessments is not affected by section 35(10), as the section only allows for the recomputation of rebates, not the reassessment of income.

4. Authority of the Income-tax Officer Under Section 35(10):
The petitioner challenges the authority of the Income-tax Officer to pass orders under section 35(10). The court examines the language of section 35(10), which authorizes the Income-tax Officer to recompute the tax payable by the company by reducing the rebate originally allowed. The court concludes that the Income-tax Officer has the power to pass orders under section 35(10), as the section explicitly provides for the rectification of rebates granted in the past.

Conclusion:
The court dismisses the petition, concluding that section 35(10) of the Income-tax Act has retrospective operation and applies to rebates granted in respect of assessments for the years 1948 to 1955 inclusive. The court also concludes that the finality of assessments before 1st April, 1956, is not affected by section 35(10), and the Income-tax Officer has the authority to pass orders under this section. The petition is dismissed with costs.

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